The Taxation Department (GDT) and Ministry of Economy and Finance (MEF) will commence a Capital Gains Tax (CGT) as of 1st January 2021.

CGT is paid on the difference between the cost of what you paid and the profit (gain) when resold. ‘Capital’ is real estate, leasing, investment capital, business reputation, intellectual property and foreign currencies.

The CGT rate will be fixed at 20% and taxpayers can choose from one of two calculation methods:

  1. Deductible: Allows 80% deduction of proceeds from an asset sale. An investor can deduct 80% of the acquisition cost and pay 20% of the gain, rather than a true gain
  2. Deduction based on actual expenses (if acquisition costs and expenses are higher than sale proceeds, no tax is due).

It will not apply to property used as a principal place of residence for 5+ years or on properties transferred among relatives.

The tax sparked debate on how high it should be and whether it would stifle growth during the current pandemic. Opposers suggested a CGT will dampen an already slowed property market and requested a further delay. Supporters state a CGT exists in most countries and argue it should have been mandated years ago.

As with VAT, a CGT offers the government income that can support the national treasury for the nation’s benefit. CGT is applicable region-wide with some exceptions and many are much higher (e.g 42% in South Korea and 35% in Thailand) but the Cambodian rate of 20% sits fairly in the middle.

 

Frequently asked questions (FAQ)

DFDL Cambodia offers an in-depth analysis of the new Capital Gains Tax

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